Chapter 17-oligopoly
What is an oligopoly?
- An oligopoly is a market structure in which there are only a few number of large firms who offer an identical or a differentiated product.
- There are many smaller companies in the industry but these are seen as non-influential in comparison to the more powerful firms who supply such a huge percentage of the market.
- These producers have such huge market power that they create high barriers of entry into the market to these smaller companies.
- These firms control the market price and account for most of the production in the trade.
- Any sudden change in a firm’s behaviour may result in a change of the price, which will have huge affect on their competitors.
- Examples of oligopolies would be the car industry, chocolate bars, mobile phone companies, supermarket companies and crude oil.